Principles of Economics Chapter 6

The long run is best defined as:

a period of time sufficiently long that all factors of production are variable.

The short run is best defined as:

a period of time sufficiently short that at least one factor of production is fixed.

To produce 150 units of output, a firm must use 3 employees per day. To produce 300 units of output, the firm must use 8 employees per day. Apparently, the firm is:

experiencing diminishing returns.

Individual supply curves generally slope ______ because ______.

upward; of increasing opportunity costs.

Average variable cost is defined as:

variable cost divided by total output.

Which of the following is a defining characteristic of all perfectly competitive markets?

All firms sell the same standardized product.

Which of the following will cause a decrease in the supply of jeans?

An increase in the wages paid to workers who make jeans.

Which of the following is NOT true of a perfectly competitive firm?

It seeks to maximize revenue.

Which of the following best explains why you are more likely to see a poor person than a wealthy person picking up aluminum cans to sell?

The opportunity cost of picking up cans is higher for wealthy people than for poor people.

If crude oil is a variable factor of production for a firm, then an increase in the price of crude oil will lead to:

a decrease in the firm's supply. Correct

If a perfectly competitive firm produces an output level at which price is greater than marginal cost, then the firm should:

expand output to earn greater profits or smaller losses.

One implication of the shape of the demand curve facing a perfectly competitive firm is that:

if the firm increases its price above the market price, it will earn zero revenue.

A variable factor of production:

is variable in both the short run and the long run.

When plotting marginal and average cost curves, the ______ cost curve always crosses the ______ cost curve at its ______.

marginal; average total; minimum

A perfectly competitive firm's supply curve is the portion of its ______ cost curve that lies above its ______ cost curve.

marginal; average variable

The primary objective of most private firms is to:

maximize profit.

Assume that the production technology required to produce goods X and Y is very similar. If a firm that is producing good X notices that the market price of good Y is rising, it will:

shift into producing good Y.

Suppose that when a perfectly competitive firm produces 500 units of output a day, it earns an economic loss. If the price of each unit of output is $1.50, then, in the short run, it's clear that this firm:

should not shut down if its total variable cost is less than $750.

Marginal cost is calculated as:

the change in total cost divided by the change in output.

Last year, Casey grew fresh vegetables, which she sold at her local farmers market, but this year, Casey did not plant any vegetables and went to work at a bank instead. If Casey's decision to change careers did not affect the price of vegetables at the farmers market, then this suggests that:

the market for vegetables is perfectly competitive.